Case Note & Summary
The petitioner, Grasim Industries Limited, filed a writ petition under Article 226 of the Constitution of India challenging an order dated 30th March 2024 passed by the Chief Commissioner of Income Tax (Central) 1, rejecting its application for waiver of interest charged under Section 234C of the Income Tax Act, 1961 for the Assessment Year 2021-22. The petitioner had paid advance tax of Rs.1,71,00,00,000/- in installments, but due to the COVID-19 pandemic, it could not correctly estimate its book profits, resulting in a shortfall in the second quarter and interest of Rs.3,88,59,353/-. The petitioner argued that the pandemic was beyond its control and relied on Section 234C, Section 119, and instructions dated 26th June 2006 empowering the Chief Commissioner to waive interest in deserving cases. The Revenue opposed, contending that the impugned order was reasoned and discretionary. The court, after hearing both sides, found that the pandemic severely impacted the petitioner's business and ability to estimate income, and that the Chief Commissioner had not properly considered the COVID-19 circumstances. The court quashed the impugned order and directed the Chief Commissioner to reconsider the waiver application afresh, taking into account the pandemic's impact and the principles laid down in the judgment. The court also noted that the petitioner had paid substantial advance tax and that the delay was only in one quarter.
Headnote
A) Income Tax - Waiver of Interest under Section 234C - COVID-19 Pandemic - The petitioner sought waiver of interest of Rs.3,88,59,353/- charged under Section 234C of the Income Tax Act, 1961 for deferment of advance tax during A.Y. 2021-22, contending that the COVID-19 pandemic prevented accurate estimation of book profits. The court held that the pandemic constituted a circumstance beyond the assessee's control, justifying waiver of interest under Section 234C read with Section 119 of the Act, and quashed the impugned order rejecting the waiver application. (Paras 1-20) B) Income Tax - Power of Chief Commissioner to Waive Interest - Section 119 of the Income Tax Act, 1961 - The court held that the Chief Commissioner has the power to waive interest under Section 234C in deserving cases, as per instructions/order F.No.400/129/2002 dated 26th June 2006, and that the impugned order failed to consider the impact of the COVID-19 pandemic, which was a valid ground for waiver. (Paras 10, 17-20) C) Income Tax - Expression 'Failure to Estimate' in Section 234C - The court interpreted the expression 'failure to estimate' in Section 234C to include situations where estimation was not possible due to unforeseen circumstances like the COVID-19 pandemic, and not merely cases of deliberate default. (Paras 8, 17-20)
Issue of Consideration
Whether the petitioner is entitled to waiver of interest charged under Section 234C of the Income Tax Act, 1961 for the Assessment Year 2021-22 on account of the COVID-19 pandemic affecting its ability to estimate advance tax correctly.
Final Decision
The impugned order dated 30th March 2024 is quashed and set aside. The Chief Commissioner of Income Tax (Central) 1 is directed to reconsider the petitioner's application for waiver of interest under Section 234C of the Income Tax Act, 1961 for A.Y. 2021-22 afresh, in accordance with law and in light of the observations made in the judgment, within a period of eight weeks from the date of receipt of the order. The petition is allowed in the above terms. Rule is made absolute accordingly. No order as to costs.
Law Points
- Waiver of interest under Section 234C of the Income Tax Act
- 1961 can be granted when failure to estimate advance tax is due to circumstances beyond the assessee's control
- such as the COVID-19 pandemic
- the Chief Commissioner has power to waive interest under Section 119 read with Section 234C
- the expression 'failure to estimate' in Section 234C includes inability to estimate due to unforeseen events.
